This blog post is written by Federico Giordano, Tax Partner on Secondment from Marchionni & Partners – HLB Italy at Withum.

The HLB International Secondment is temporary work assignments arranged between HLB Member Firms that operate in two different countries.

Many people do not realize that it is possible to explore different career possibilities by temporarily changing roles within the HLB professional network. This is often known as “going on secondment” and is especially prevalent in Multi-National Enterprises (MNEs) where the management is adept at making the best use of the various skills and interests of their key staff.

In the past, Withum has informally sent and received staff among the HLB Member Firms throughout the world. A few years ago, Withum formalized a “Secondment Program” to temporary assign staff to HLB Member Firms to continue to provide its staff with many opportunities to elevate their skills and increase their wins.

What Do You Know about HLB International?

Formed in 1969, HLB International is a world-wide network of independent professional accounting firms and business advisors present in more than 130 countries worldwide. HLB International ranked 13th worldwide among the “Top 20 Networks 2016” published by AccountancyAge (latest combined revenue USD 1,910M) and 11th in Europe among the “2015 Regional Breakdown” published by the International Accounting Bulletin. Withum is an involved member of HLB International.

Why Go on Secondment?

There are various advantages to go on secondment – mainly to improve your career growth by developing your resume and doing networking between professionals of different generations and backgrounds. In addition, to improve your language skills if you decide to move on secondment to a foreign language-speaking country.

It is not about changing jobs completely in order to maximize this sort of opportunity. A secondment program offers professional staff who are content in their current role the chance to try something new in a foreign country, to improve their skills and experience in order to better interact with others.

This is exactly how I see the secondment experience at Withum. I am a tax partner at Marchionni & Partners in Pesaro, an Italian firm with a staff of 35 people, and I provide assistance on international tax matters both for companies and individuals. Staying within Marchionni & Partners is challenging, due to its small size I have to be a multitasking professional able to work individually and as a part of a team and, of course, able to engage and keep clients bringing business.

Moreover, I am a board member at HLB Italy in Milan, an alliance of Italian tax, accounting and legal firms. HLB Italy, with a staff of over 250, with more than 200 professionals and a combined revenue of around EUR 30 million, provides accounting, tax and legal services through its offices in Milan, Rome, Turin, Verona, Florence, Parma and Pesaro. Together with the other board members, we determine the strategic policies and professional standards for the HLB Italy Member Firms and establish the marketing strategies to meet the goals and objectives of the alliance.

I love my job at Marchionni & Partners, but I believe that the move to Withum gave me a unique opportunity to learn about the different working practices, organizational structures and cultures. My secondment is for a period of three months, and is providing me an enormous challenge, both personally and professionally. The “Withum Way” is great and I believe I will gain an important cultural background which might be very important in establishing professional relationships.

A secondment program is a fantastic way to meet people in other areas of practice and with other types of jobs, and find out what they do and what is important to them. It is not easy to stay abroad, out of the familiar surroundings, without support of the close relatives and friends, but an international experience will give you a much more rounded experience so I can recommend it with confidence.

This past August, I had the amazing opportunity to travel to Haiti and volunteer through an organization called Adventures in Missions (AIM). In my quest to make a lasting imprint on the hearts of orphaned children around the world, Haiti seemed like the perfect place for my next destination.

Haiti is not exactly your typical summer vacation spot. Although, it is ironically situated on the same island as the Dominican Republic, which is home to some of the world’s most beautiful and tropical beaches. Haiti is still very much suffering from the effects of the 2010 earthquake and also hurricane Sandy in 2012. It is amazing how a few hours of a terrible storm can lead to years of rebuilding.

I was part of a team of 11 people volunteering just outside of the capital of Haiti (Port-au-Prince), in a town called Merger. Fortunately for our group, AIM has wonderful contacts all over the globe and we were able to stay with a Haitian family and live the authentic Haitian lifestyle for a week. This meant — are you ready for it? — no electricity and no running water for an entire week. Call me crazy, but I actually enjoyed showering with a (very cold) bucket of water, brushing my teeth with a bottle of water (and no sink), pouring a bucket of water down the toilet in order to flush it, walking around with a flashlight glued to my head at night, and sleeping on the concrete roof of the house for a week. I also had the experience of being awoken by roosters every morning, witnessing some incredible sunrises, and being able to stare at a breathtaking rooftop view of the island of Haiti at my leisure. I can also confidently say that Haiti has some of the best food I’ve ever tasted!

We spent most of our time that week in a local nearby children’s orphanage. The orphanage is home to children ages infant to 18 years old, and it was an absolute joy to be able to spend time there. Unlike the orphanage in Africa that I know to have a complete random assortment of entertaining toys, this orphanage had next to nothing, and it was heartbreaking to see this. The children were ecstatic when we handed out toys and brought bubbles, coloring books, etc. The boys especially enjoyed watching this (All-)American girl showcase her skills with a soccer ball! [Editor’s note – I later schooled all the boys on the actual soccer field… here at WS+B, we work hard AND play hard!] Spending time with these children brought a lot of fun and laughter as well as some really awesome memories. The children loved more than anything to just sit next to you and hold your hand, and it brought me such joy to be able to give them that, if only for a few hours each day.

Outside of spending time in the orphanage, we also spent a lot of time out in the community of Merger and getting to know the locals. We met so many different people with so many inspiring stories. We were invited into many different homes and were offered an immense amount of hospitality by complete strangers. It is amazing how humble, gentle and genuine the people are in Haiti, and I was blown away by the respect and humility of their culture and people. I loved the time I was able to spend getting to know the people in Haiti for many reasons, but mainly because their happiness, contentment and joy are simply contagious.

My experience in Haiti was drastically different from any other experience I’ve ever had before, but to sum it all up, it was nothing short of amazing. Haiti is part of a beautiful island with a unique culture and some wonderful people! This was definitely one of those experiences where I feel as though I took away much more than I was able to give. Attitude of gratitude. Thanks Haiti! Hope to see you again very soon!

No, I didn’t have any ‘shrimp on the barbie,’ or sparring sessions with any kangaroos…so what exactly did I do in Australia for three months?

The boring response would be that I audited different clients during their busy season. While this is true, I also had an amazing experience seeing many new sites, sounds and culture. A typical day in the office wasn’t much different then checking your mail in the morning, analytical procedures, making a client phone call to explain to a controller how to use the equity method of accounting, going through some lengthy yet necessary checklists and praying you can get a cash flow statement to reconcile at the first attempt. However, throughout the day you take notice of subtle things through conversing, such as learning that South Africans refer to traffic lights as robots or hear the gents bicker over last night’s rugby match. Even though English is their language, the Aussies have a tendency to truncate words and use lingo that can catch you off guard at times. Hint: thongs are flip-flops and Zed is just the letter “Z”. Also, I heard more Iggy music than I could put up with.

It’s no surprise that Sydney is one of the most desirable places to live with the moderate winters, long summers, beaches and plenty of parks. The landscape and weather promotes outdoor activities like a walk through the ‘bush,’ a swim on a lunch-break or a game of netball (the most ridiculous knock-off of basketball ever {http://www.youtube.com/watch?v=bgr2zmq9CUk}). There are many waterways throughout the Sydney metro area which makes water transportation a means of commuting. I was one of approximately 4,000 people who took the Manly to Circular Quay service daily. I’d say the 30 minute ferry ride was one of the most memorable aspects because, aside from people watching, I got a daily dose of the Opera House and Harbour Bridge. Some days had high seas which was a thrill. Despite being a former penal colony where the British shipped, Sydney has a lot to offer which is why many British and other expatriates, relocate to the 6th largest country on Earth.

From “A Primer on Transfer Pricing” by Robert J. Misey, Jr., updated by Kimberlee S. Phelan

A transfer price is the price charged for intercompany transactions. The principles of I.R.C. section 482 require that intercompany transactions be priced at arm’s length. Although ostensibly a simple concept, the arm’s length standard has spawned hundreds of pages of regulations.

Transfer pricing continues to be a hot issue for multi-national companies. Mr. Misey has learned informally from his former colleagues at the I.R.S. that companies with sales in excess of $15 million in sales can expect to have an I.R.S. economist review their intercompany transactions. Because intercompany transactions across international borders continue to expand and because the I.R.S. continues to rigorously review intercompany transactions, transfer pricing is more than just the international tax issue of today, it is the tax issue for this millennium.

Political awareness of the amount of taxes paid by foreign-owned companies, may have led many U.S.-based companies to not worry about transfer pricing. However, the transfer pricing regulations can trap U.S.-owned companies with modest operations abroad just as easily as foreign-owned companies.

For example, suppose NJCo manufactures and sells widgets in the U.S. Due to increased widget orders from Canadian customers, NJCo decides to form a Canadian distribution subsidiary (“CanSub”). Although CanSub does not have any manufacturing functions, CanSub employs its own administrative and sales staff while using NJCo’s unique distribution software to ensure that there are not any distribution problems. In an effort to make sure that CanSub is financially solvent, CanSub has payment terms to NJCo of six months and, if CanSub’s customers do not pay, CanSub enjoys the use of NJCo’s collection staff, which is comprised of former defensive linemen from Rutgers.

The Best Method Rule

The best method rule in the section 482 regulations states that the arm’s length result of a controlled transaction must be determined under the method that, given the facts and circumstances, provides the most reliable measure of an arm’s length result. The application of the best method rule establishes an arm’s length range of prices or financial returns with which to test the controlled transactions. The tested party must fall within the middle fifty percent of that range, known as the interquartile range.

In determining the most reliable measure of an arm’s length result, NJCo should consider the degree of comparability between controlled and uncontrolled transactions by analyzing the functions, contractual terms, risks, economic conditions, and the nature of goods and services supplied. If this analysis requires numerous or sizable adjustments to meet comparability, the comparable may not be reliable.

Future blogs will review how the U.S. transfer pricing regulations affect the intercompany transactions between NJCo and CanSub.

For additional information, please contact Kimberlee Phelan or Robert Misey

Located just an hour drive north from Central Hong Kong, Shenzhen (in Guangdong Province) was the first (and most successful) “Special Economic Zone” in China. This special status allowed western industrialization — more than US$30 billion in foreign investment has gone into both foreign-owned and joint ventures initially in manufacturing but more recently in service industries as well. One of the fasted growing cities in the work, it is a teaming with a population of 15 million — and all of the traffic that goes with a population that expands faster than infrastructure. Because of its proximity to the capital markets, legal system and economic stability and diversity of Hong Kong, Shenzhen is the logical first step for many foreign companies into China. Shenzhen is home to the Shenzhen Stock Exchange, is one of the busiest container ports in China, and has the headquarters of numerous high-tech companies. Once established in Shenzhen through a representative office, use of a contract manufacturer, or operation of a factory, moving further into mainland China is the next step.

Despite being in Shenzhen for less than 24 hours, I met both with colleagues at HLB Wu Zhou Song De and with a client. I saw two offices and toured my client’s R&D and Quality Control operations. One cultural business difference I learned was of “rest time” over the lunch break. Chinese workers are given about half an hour to rest after lunch. In one office, this meant turning off the overhead fluorescent lights and literally putting your head on your desk to relax. In another office, space was found for ping-pong tables, and office-wide tournaments are held daily.

HLB Wu Zhou Song De in Shenzhen has worked with over 35 Chinese publicly traded companies. The firm has experienced tremendous growth over the past few years — what in China hasn’t?

To my eyes, Shenzhen had all of the energy of Hong Kong, without the upscale retail shops and overly expensive hotel rooms.

In Shandong province, I had the opportunity to visit the provincial town of Jinan — a town of 8 million. Jinan is known for its springs — underwater aquifers feed 72 named artesian karst springs at a public park in the middle of downtown Jinan called Baotu Quan Gong Yuan. The most famous of these springs is the 3,500 year old Baotu Spring. The park is also the ancestral home of one of Shandong’s most beloved poets, Li Qingzhao (1084 – 1151). Her life story is presented through life-size dioramas in the rooms in her home. The waters of the Jinan springs are said to be “softer and sweeter” and contain health-affirming properties.

While in Jinan, I spent an afternoon meeting with HLB colleagues at HLB Baicheng, a large tax consulting firm with offices in both Jinan and Shanghai. In addition to learning about Baicheng’s practice and preparing for a conference the next day, we were treated to a “Chinese Banquet.” I was honored to be received by the head of Shangdong ‘s institute of certified public accountants as well as two members of the international division of the Chinese Tax Authority. The evening began with toasts (4 by the host, 3 by the co-host, 2 by the protégés of the hosts and then 1 by each of the guests). The meal included all measure of Chinese delicacies — seafood soup with sea cucumber, eel, chicken (including the head, comb and feet). How lucky was I to sit next to the host and not have to chose what to eat, but to merely eat what was put on my plate by my host?

The next day, my fellow HLB International Tax Committee members and I presented at the Annual Shangdong Tax Conference, co-sponsored by the Shandong institute of certified public accountants and HLB Baicheng. We presented an overview of the tax systems of the US, Germany and the Netherlands to almost 600 delegates (shown below). For the first time, I had to work with a simultaneous translator — our presentations were in both English and Chinese, and our translators were excellent. After one afternoon, they were able to handle complex tax concepts in both English and Chinese.

A 12-hour time difference (after 16 hours on a plane) really does wreak havoc on a sleep schedule. “Jet Lag” most often results from a high-speed trip through multiple time zones. Duh! The symptoms include fatigue, inability to concentrate, feeling disoriented or out-of-sync and headaches — none of which you want to have to deal with when trying to conduct BUSINESS after that “high speed trip through multiple time zones.”

Is it avoidable? Not really, but it can be partially managed (at least I’ve TRIED to manage). I haven’t been one to go the prescription drug route when travelling, but I find a glass of wine and two Advil PM help me fall asleep on long plane flights — and discovered they are only somewhat useful when trying to get back on “sleep schedule” either during or after a long “high speed trip through multiple time zones.” What do others recommend?

Prepare for the time change: I remember my father trying to do this as he prepared for a business trip from Southern California to Boston — each night trying to go to sleep one hour earlier and wake up one hour earlier until he was on Boston time for a few days before the trip. Might work for a 3-hour time difference, but a 12-hour time difference?

Anticipate the time change: I always set my watch to the new time zone the moment I step on the plane (going half way around the world, I didn’t have to touch my watch!). Then, on the plane, “act” like you’re in the new time zone. The experts also say to avoid caffeine and alcohol on the flight, but I stick to my red wine and Advil concoction for falling asleep.

When you arrive, stay awake if it’s daytime there, and get into the sunshine. Exercise, but don’t overdo it. Take only a short nap (before 2 pm local time and sleep no more than one hour). Go to sleep and wake up on time, local time — and if you can’t manage sleep, still get out bed on time!

How did I do with the 12-hour time change twice in two weeks? I adjusted right away. . . the first night. Then I was wide awake for the next two nights while in China, before I resorted to the Advil PM. Arriving home, I was smarter (or more experienced). Advil PM for the first two nights and I was right back on local time without too much fatigue. The headaches I’m chalking up to something besides jet lag — a huge tax filing deadline on September 17th.

The items in this blog are informational only and are not meant as professional advice. Consult with your tax advisor to determine how any item applies to your situation. Kimberlee Phelan writes Where In the World, and any opinions expressed or implied are not necessarily shared by anyone else at WithumSmith+Brown.

Author

Kimberlee S. Phelan, CPA, MBA, specializes in international tax, concentrating her efforts on special projects involving corporate tax research and planning, as well as inbound and outbound international structuring for corporations and individuals. She is actively involved in Withum’s international affiliation of firms, HLB International, serving as the co-chair of the HLB North America Tax Services Group as well as co-chair of the HLB International Tax Committee.

Having travelled to over 40 countries, Kimberlee will write about her experiences in this blog, highlighting interesting discoveries, tax and accounting law changes, as well as important business and etiquette tips.